Class actions are a bit of a legal hokey cokey - Craig Watt
To opt in or to opt out of group proceedings, that is the question worth asking, says Craig Watt
Class actions have garnered significant media coverage, with some of the world's biggest companies finding themselves embroiled in high-value litigations, with hundreds, or even thousands, of claimants involved.
They include accusations that Google took advantage of market dominance by shutting out competition on mobile search engines, Mastercard being accused of unlawful conduct resulting in higher prices for consumers, and Apple being taken to court for allegedly selling iPhones with defective batteries.
In Scotland the ability to raise class actions (“group proceedings” here) was introduced in 2020. So what does this relatively new legal instrument mean for those of us who live and work here?
Class actions are claims where two or more parties collectively raise a claim. Those parties could be individuals or businesses but must have suffered a loss in the same or, at least, a similar way, caused by the business or individual they are raising the claim against. They are usually raised against large businesses, with claimants seeking financial payments for alleged wrongdoing.
Class actions have covered a wide variety of matters, including actions raised by consumers for product defects or misleading advertising, environmental claims, competition law claims and securities litigations.
They can either be brought by “opt-in” or “opt-out”' procedure, depending on the country in which the claim is being made. Under an opt-out procedure, all individuals and businesses who meet the relevant criteria to fit into that “class” are automatically entitled to compensation if the claim is successful. They do not require to actively sign up to the class action but can opt out of receiving compensation. Opt-out class actions are available in a number of countries such as the US, and in the UK for “competition” claims.
In Scotland, actions can currently only be brought by the opt-in procedure which requires claimants to actively sign up to be part of the claim. However, minutes from a March 2024 meeting of the Scottish Civil Justice Council suggest further thought may be given to introducing opt-out procedure, with talk of a potential working group to discuss its introduction.
What impact would introducing opt-out in Scotland have? Simply put, the more claimants included in a class action, the greater likelihood the overall payout will be higher if successful. Without a need to actively sign up, it is likely opt-out procedure will result in larger claimant groups. Moreover, obtaining funding for class actions is easier the higher the potential end payout.
Bringing multiple claims as part of a class action allows for economies of scale, where each individual claim is often too small to be economically viable to pursue.
As such, there is a risk that the introduction of opt-out procedure here could entice litigation funders and law firms to raise more class actions which would otherwise be difficult to pursue due to low engagement.
Multi-million-pound claims remain a real risk for many businesses in Scotland under an opt-in procedure. While the multi-billion-dollar pay-outs that have been seen in the US may seem a world away, they would become closer with the introduction of opt-out in Scotland. It’s likely to be some time before any changes to the rules permit this. In the meantime, expect the momentum of group proceedings in Scotland to continue to grow.